Madras High Court
Union Of India vs M/S.Arss Infrastructure Projects Ltd on 11 July, 2022
Author: M.Sundar
Bench: M.Sundar
Arb O.P.(Com. Div.)No.297 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 11.07.2022
CORAM
THE HONOURABLE Mr.JUSTICE M.SUNDAR
Arb O.P.(Com. Div.)No.297 of 2022
Union of India
Department of Railway,
Represented through its
General Manager, Southern Railway,
Park Town, Chennai-600 003.
... Petitioner
- Vs -
M/s.ARSS Infrastructure Projects Ltd.,
Mancheswar Industrial Estate,
Bhubaneswar, Odisha.
... Respondent
Prayer: Arbitration Original Petition filed under Section 34(2), (b)(ii) and
Section 34 (2A) of the Arbitration and Conciliation Act, 1996 praying to set
aside the Arbitral Award passed by the Learned Arbitrator dated 27.01.2020
and order dated 18.03.2020 passed in rectification application made in relation
to disputes arising out of Agreement No.59/CN/2008 dated 06.08.2008 in so far
as Claim No.1 and Claim No.5.
For Petitioner : Mr.P.T.Ramkumar
For Respondent : Mr.P.Prakash
for Mr.K.Sathishkumar
***
https://www.mhc.tn.gov.in/judis
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Arb O.P.(Com. Div.)No.297 of 2022
ORDER
Captioned Arb OP has been presented in this Court on 23.12.2021 assailing an Arbitral Award dated 27.01.2020 clarified in and by an order dated 18.03.2020 vide a clarification petition under Section 33 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1966)' [hereinafter 'A and C' Act' for the sake of convenience and clarity]. To be noted, this Arbitral Award dated 27.01.2020 together with Clarification Order dated 18.03.2020 shall be collectively referred to as 'impugned award' for the sake of brevity, convenience and clarity.
2. Mr.P.T.Ramkumar, learned standing counsel for Southern Railway is before this Court on behalf of sole petitioner. Mr.P.Prakash, learned counsel representing Mr.K.Sathish Kumar, who has lodged a caveat was before this Court. To be noted, petitioner-Southern Railway has not sought any interim orders by filing an interim stay petition or any other interlocutory application. Be that as it may, the role of caveator counsel if at all and if that be so will arise only if the petitioner crosses the admission barrier. To be noted, captioned Arb OP has been listed in the Admission Board i.e., 'MOTION LIST' today. https://www.mhc.tn.gov.in/judis 2/13 Arb O.P.(Com. Div.)No.297 of 2022
3. Factual matrix in a nutshell will suffice as this is a legal drill under Section 34 of A and C Act. Short facts shorn of elaboration are that petitioner- Southern Railway awarded a contract to respondent for 'Gauge Conversion between Pollachi-Palghat, Pro-Reconstruction of Minor Bridges, Earthwork, Excavation in cutting and forming bank inclusive yards and other protective works from Km 22/5 to 55/00 in between Meenatchipuram and Palghat Town Stations' (hereinafter 'said work' for the sake of convenience and clarity); that agreement vide which said work was awarded to 'respondent' (hereinafter 'contractor' for the sake of convenience and clarity) was not marked as an exhibit before 'Arbitral Tribunal' ['AT' for the sake of convenience and clarity] which made the impugned award; that AT was constituted by a sole Arbitrator who is a former Hon'ble Judge of this Court (to be noted, this is mentioned only to complete the facts narrative); that the value of said work is a little over 29.73 crores [Rs.29,73,15,590/- to be precise]; that a 'Letter of Acceptance' ['LOA' for the sake of convenience and clarity] dated 02.07.2008 was issued to respondent [Ex.R5] before AT; that subsequently an agreement dated 06.08.2008 was executed but as already alluded to supra, this agreement was not marked as an exhibit before AT but a Bar Chart Program dated 06.08.2008 was marked as Ex.R-4 before AT; that the said work had to be completed within a period of 15 https://www.mhc.tn.gov.in/judis 3/13 Arb O.P.(Com. Div.)No.297 of 2022 months from LOA i.e., on or before 30.09.2009; that 'Special Conditions of Contract' ['SCC'] and 'General Conditions of Contract' ['GCC'] which are in the forms of template applied to said contract and these two templates have been marked as Exs.R-2 and R-3; that Clauses 63, 64 of GCC [Ex.R3] are Arbitration clauses, there is an arbitration agreement between the petitioner and respondent being 'arbitration agreement' within the meaning of Section 2(1)(b) read with Section 7 of A and C Act; that the said work was admittedly not completed within the time frame of 15 months; that as many as 7 extensions being given by Southern Railway; that these 7 extensions are inter alia under Clauses 17-A(ii) and 17-B of GCC; that these 7 extensions stand over the period from 01.10.2009 to 30.06.2012; that the 7th and last extension was granted in and by a communication dated 29.03.2012 [Ex.R-34]; that 7 th extension was for the period from 01.04.2012 to 30.06.2012; that in the impugned award Ex.R-34 dated 29.03.2012 has been wrongly described as 6th extension whereas it is 7th extension for the period from 01.04.2012 to 30.06.2012; that post Ex.R-34, said contract was terminated by Southern Railway in and by a communication dated 17.04.2012 [Ex.R-37]; that this led to arbitrable disputes between the parties; that the arbitration agreement was triggered; that AT constituted by a sole Arbitrator was constituted; that Hon'ble sole Arbitrator entered upon reference, https://www.mhc.tn.gov.in/judis 4/13 Arb O.P.(Com. Div.)No.297 of 2022 adjudicated arbitrable disputes between the parties and made the impugned award; that before AT contractor as claimant made claims under seven heads of claims; that with regard to seven heads of claims, Claim No.1 pertains to challenge to the Termination Notice [Ex.R-37], a declaratory prayer was made and with regard to the remaining heads namely heads 2 to 7, a quantum award was sought; that this has been wrongly shown as declaratory award for Claim Nos.1 and 6 and quantum award for Claim Nos.2 to 6 in the Claim Petition; that there is no difficulty in accepting this as an inadvertent typographical error; that Southern Railways made a counter claim which is also under seven heads of claims; that Southern Railway very fairly submitted that claim heads 1 to 3 are partially admitted; that AT on the basis of rival pleadings framed seven issues; that AT held the termination of said contract in and by Ex.R-37 dated 17.04.2012 (termination notice) to be bad and therefore, consequently held that the contractor is entitled to refund of little over 2.46 crores (Rs.2,46,25,509/- to be precise) vide claim No.5 which is in effect refunds of 'Performance Bank Guarantee' ['PBG'], 'Security Deposit' ['SD'] and 'Earnest Money Deposit' ['EMD']; that learned standing counsel for Southern Railway very fairly submits that only these two aspects of the matter namely termination of said contract being held to be bad and the sequitur directive to refund the PBG, SD and EMD https://www.mhc.tn.gov.in/judis 5/13 Arb O.P.(Com. Div.)No.297 of 2022 being directed to be refunded alone are challenged by Southern Railway.
4. This Court on a perusal of impugned award finds that Exhibits have been marked before AT, contractor as claimant has marked as many as 27 exhibits namely Exs.C1 to C27 and Southern Railway has marked as many as 39 exhibits namely Exs.R-1 to R-39. This Court is informed that no oral evidence was let in. This means that all the exhibits i.e., all the 66 exhibits which includes certain exhibits series have been marked by consent. This Court is also informed that the contractor has not filed any separate Section 34 petition assailing the impugned award.
5. Now that the learned standing counsel for Southern Railway has made it clear that the challenge to the impugned award is qua termination being held to be bad and sequitur directive to refund PBG, SD and EMD, the task of deciding the captioned Arb OP for admission is cut out.
6. Before proceeding further, this Court makes it clear that as already alluded to supra, captioned Arb OP is listed in the Admission Board today and therefore, heard out in accordance with 'The Madras High Court (Arbitration) Rules, 2020' [hereinafter 'MHC Arbitration Rules' for the sake of convenience and clarity] and more particularly, in accordance with Rule 8 therein which talks about procedure and regulations under Section 34 of A and C Act. It is https://www.mhc.tn.gov.in/judis 6/13 Arb O.P.(Com. Div.)No.297 of 2022 also necessary to make it clear that MHC Arbitration Rules has Practice Directions and vide clause 8.5 thereat it has been made clear that proceedings under Section 34 of A and C Act shall be by way of summary procedure. This clause 8.5 of practice directions of MHC Arbitration Rules was made drawing inspiration from Fiza Developers principle i.e., ratio laid down by Hon'ble Supreme Court in Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited reported in (2009) 17 SCC 796. To be noted, Hon'ble Supreme Court in a subsequent judgment namely Emkay Global Financial Services Ltd., v.Girdhar Sondhi reported in (2018) 9 SCC 49 held Fiza Developers principle to be a step in the right direction. Fiza Developers principle, put in simple terms means that Hon'ble Supreme Court held that Section 34 legal drill shall be a one of issue summary procedure. By saying 'one issue summary procedure' it does not mean that the lis should turn on one issue but the arbitral award being put to challenge under Section 34 itself becomes the lone issue in a Section 34 legal drill.
7. This Court, having set out the statutory perimeter and the procedural Rules within which it has perambulated in the Admission Board, now proceeds to deal with the arguments advanced by learned standing counsel for Southern Railway. There would be discussion and dispositive reasoning infra. https://www.mhc.tn.gov.in/judis 7/13 Arb O.P.(Com. Div.)No.297 of 2022
8. Learned Standing counsel for Southern Railway, notwithstanding very many averments and several grounds in the petition made it clear that he would make focused submissions on two points in his campaign against the impugned award and those two points are as follows:
a) Contractor has been given as many as 7 extensions but has not shown any progress and therefore, it cannot be gainsaid that contractor is entitled to refund;
b) Once the contract is terminated, the question of refund of PBG, SD and/or EMD does not arise.
9. This Court carefully considered the aforementioned two focussed submissions made by Mr.P.T.Ramkumar, learned standing counsel for Southern Railway.
10. A careful perusal of impugned award more particularly paragraphs 31, 32, 37 and 38 thereat make it clear that AT by giving cogent reasons and by testing the Termination Notice i.e., Ex.R-37 on merits has come to the conclusion that it is clearly stemming from complete non application of mind and/or mala fides. The logic in sum and substance i.e., dispositive reasoning of AT is when the 7th extension was given on 29.03.2012 vide Ex.R-34 and when https://www.mhc.tn.gov.in/judis 8/13 Arb O.P.(Com. Div.)No.297 of 2022 the extension is for the period from 01.04.2012 to 30.06.2012, hurried termination in just about a fortnight within the extended period i.e., on 17.04.2012 (Ex.R-37) is clearly unacceptable. The most relevant paragraphs of impugned award are paragraphs 37 and 38, which read as follows:
'37. Though he Counsel for the Respondent contended that under Ex.R-10, Ex.R-12, Ex.R-14, Ex.R-16, Ex.R-16, Ex.R-17, Ex.R-18, Ex.R-21, Ex.R-22, Ex.R-24, Ex.R-25, Ex.R-26 pointed out to the Claimant that the progress of work is not satisfactory and the Claimant has to improve the infrastructure and show some adequate progress of the work, the Respondent has been extending the time periodically as prayed for by the Claimant accepting the reasons for the delay mentioned by the Claimant in the requisition. In the written submissions also it is clearly mentioned by the Respondent basing upon their Counter statement as follows:
"Considering the delay caused in traffic closure of MG tracks, trees, cutting issues and other difficulties viz heavy down pour, labour disputes, etc., mentioned by the Claimant/Contractor in their time extension request, the time was granted in six spells upto 30.06.2012 as mentioned below".
This statement is just above the tabular statement extracted supra. So, there is absolutely no dispute that the extension of time was granted only on the ground of the delay caused beyond the control of the Claimant and the extension has been granted periodically under Clause 17(A)(ii).
38. Even though the Respondent issued a 7 days show cause notice under Ex.R27, dated 12.10.2011 the same has been waived by accepting the reply of the Claimant in Ex.R-28 dated 14.10.2011 and https://www.mhc.tn.gov.in/judis 9/13 Arb O.P.(Com. Div.)No.297 of 2022 5th extension was granted. Similarly, under Ex.R31 dated 20.02.2012 the Respondent issued a second show cause notice for which the Claimant replied under Ex.R-32 dated 27.12.2012. The said reply was accepted by the Respondent without any demur and the 6th extension was granted under Ex.R-34 dated 29.03.2012.'
11. The above makes it clear that the view taken by Hon'ble Arbitrator is clearly a plausible view. In a Section 34 legal drill unless a protagonist of Section 34 petition is able to demonstrate that the view taken by Hon'ble Arbitrator is an implausible view, this Court will not interfere in a Section 34 legal drill. Post Ssangyong case [Ssangyong Engineering and Construction Company Limited Vs. National Highways Authority of India reported in (2019) 15 SCC 131] in which oft quoted Associate Builders case [Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49] was explained, there can be no examination on merits qua an arbitral award in a legal drill under Section 34 of A and C Act. The law is well settled on this aspect of the matter.
12. This takes this Section 34 Court to the next argument advanced by learned standing counsel for Southern Railway. Next argument is once the contract is terminated, the question of refund of PBG, SD and/or EMD does not arise. This Court is of the view that this argument tantamounts to begging the https://www.mhc.tn.gov.in/judis 10/13 Arb O.P.(Com. Div.)No.297 of 2022 question as this argument is only sequitur to the first of the arguments i.e., challenge to finding of AT that the termination is bad. This Court finds that there is no ground to interfere qua impugned award regarding the finding of AT that the termination of said contract (Ex.R-37) is bad as it is not an implausible view and therefore, this Section 34 legal drill does not call for judicial intervention. Once this Court has taken the view that the finding returned by AT that termination is bad, it follows as a sequitur nay inevitable sequitur that PBG, SD and/or EMD have to be refunded. After all if the termination is bad, the question of PBG, SD and EMD being retained by Southern Railway does not arise.
13. Before writing the operative and concluding part of this order, this section 34 Court deems it appropriate to make it clear to remind itself that a section 34 legal drill is neither an appeal nor a revision. It is not even a full- fledged judicial review. It is a mere 'challenge to an award' within the statutory perimeter sketched by Section 34 of A and C Act. It is a legal drill where if a protagonist of a section 34 petition is able to demonstrate that the challenge to an award fits nay fits snuggly into one or more of the pigeon holes, i.e., slots adumbrated under section 34, the award will be dislodged. Conversely, it is axiomatic that if the protagonist is unable to demonstrate this before a section https://www.mhc.tn.gov.in/judis 11/13 Arb O.P.(Com. Div.)No.297 of 2022 34 court in his campaign against the impugned award, there will be no judicial intervention. This takes this discussion to judicial intervention. The principle of minimum judicial intervention is ingrained in section 5 of A and C Act and this section 5 of A and C Act should be read with section 35 of A and C Act which ingrains in it the principle of finality of arbitral awards. Therefore, Section 34 is a default provision which provides for a delicate legal balance between minimum judicial intervention and finality of arbitral awards (Sections 5 and 35 of A and C Act) on one side and the bedrock principle of judicial review qua rule of law on the other. This is the sublime philosophy underlining the A and C Act. This principle has been applied qua discussion and dispositive reasoning supra.
14. In the light of the narrative thus far, this Court finds no ground to issue notice in the captioned Section 34 Arb OP. In other words, captioned Arb.OP fails to pass muster in the Admission Board i.e., fails to cross the threshold Admission barrier. The sequitur is captioned Arb OP is dismissed. There shall be no order as to costs.
11.07.2022 kmi Speaking/Non-speaking order Index : Yes / No M.SUNDAR, J https://www.mhc.tn.gov.in/judis 12/13 Arb O.P.(Com. Div.)No.297 of 2022 kmi Arb O.P.(Com. Div.) No.297 of 2022 11.07.2022 https://www.mhc.tn.gov.in/judis 13/13